LNG Terminal: ECC rejects Petroluem Division’s report

In the latest Economic Coordination Committee (ECC) meeting, initial outcomes of a report by the Petroleum Division on Engro Elengy Terminal Private Limited (EETPL) were declared incomplete by the cabinet. The committee thereby requested a more comprehensive report on the LNG terminal set up by the company which happens to be Pakistan’s first and only LNG terminal.

The ECC discovered that data related to the equity engrossed in setting up the LNG terminals as well as the rates of return was not mentioned. The committee hence dismissed the findings of the Petroleum Division report for a lack of relevant financial details. Details regarding all aspects related to agreements, capacity utilization, charges collection, equity involved, and rates of return were demanded.

The terminal had also been previously the subject of a NAB probe during the last government’s tenure. However, the investigation was called off on grounds of scaring away LNG providers.

The LNG terminal was initiated on a tender invitation by the Inter-State Gas Systems in accordance to Public Procurement Regulatory Authority rules on September 2013. The ECC was informed that the LNG services agreement was signed on April 30th, 2014 where EETPL would be supplying its only client; Sui Southern Gas Company (SSGC). The charter would last for 15 years commencing from March 28, 2015, when the Terminal began operations.

According to the contract, EETPL was obliged to run an annual average of up to 600 million cubic feet per day (mmcfd) of LNG into the grid through SSGC. The ECC was told that for the first year this amounted to 1.5 million tons at 200 mmcfd. From year 2 to15, the contract stipulated that company operate the terminal at its full capacity i.e. 3 million tons per annum or an average rate of 400 mmcfd.

Another clause in the contract allowed for the acquirement of the additional capacity of 200 mmcfd. In accordance to these terms capacity charges incurred for the first year stood at $272,479 per day whereas from the second year onwards it would fall to $228,016 per day.

The committee thereby requested a more comprehensive report on the LNG terminal set up by the company which happens to be Pakistan’s first and only LNG terminal.

The ECC was also assured that EETPL ensured that the terminal’s capacity was not underutilized as it would incur heavier charges. Yet the committee also observed that vital information regarding equity investment and rates of return was missing from the report.

As per official findings, the terminal was operating at its low capacity of 400 mmcfd until December of 2017. EETPL had subsequently requested the government to permit the private investment needed to add 200 mmcfd in order to reduce capacity charges. Unfortunately, the preceding PML-N government had rejected the request thus triggering higher capacity charges of up to $1.45 million per million British thermal units that were then passed off to consumers.

The terminal had also been previously the subject of a NAB probe during the last government’s tenure. However, the investigation was called off on grounds of scaring away LNG providers. Pakistan is set to become a top market for competing LNG providers such as USA and Australia apart from Qatar and the EU.

Global Village Space is a news web portal that aims to provide a platform to all to promote dialogue and understanding. The portal will present all shades of opinion to enhance understanding. We encourage our writers to be respectfully irreverent and our readers to be tolerant.